Tuesday, 10 April 2012

Financial dishonesty was one of the contributing factors that caused the recent global economic crisis. Against this backdrop, a new study led by Alan Lewis at the University of Bath has provided an elegant lab demonstration of the way that for most people, right and wrong aren't clear cut. Instead, the research shows people look for ways to justify their financial cheating, probably to maintain their perception of themselves as essentially good. Oh, and the research also suggested that economics students are more dishonest than psychology students - not great news for the future of the financial world!

The first part of the study involved 94 psychology and economics undergrads rolling a die under a cup, and then looking through a hole in the cup so that they alone could see the number. They then reported that number to a researcher on the understanding that it would be translated into a cash donation by the researchers for Cancer Research UK (1 on the die would equal a 10p donation; 6 would equal 60p and so on). Afterward the researcher gave this amount to the participants, who inserted it into a donation box.

The key finding here is that the students tended to report higher numbers than you'd expect from a fair die. So, for example, 24.5 per cent of participants said they'd rolled a six whereas a fair die should have produced a figure of 17 per cent. The researchers estimated that this means 9 per cent of participants lied about rolling a six. This is substantially higher than the figure obtained in a previous study when participants were playing for their own cash reward and it therefore shows how people indulge in moral relativism. More people seem to think it's okay to cheat if it's for charity, than if it's for their own gain.

The second part of the study involved a thought experiment. The same students were asked to imagine rolling a die three times (each time for their eyes only), over and over. They were given twenty hypothetical sequences of the numbers they produced (e.g. 1, 1, 1). In each case, the first number represented the cash reward they would get, where a 1 would equal £1 and so on. The second two numbers represented two further rolls, to establish that the die was fair and to make the sure the die was left in a re-set position. The hypothetical question for each sequence - what first number would the participant tell the researcher they'd obtained? Would they tell the truth, or lie to claim a higher cash reward?

The main finding for this part of the study is that the proportion of lies varied according to the numbers produced in the second and third rolls. For example, if a person (hypothetically) produced a six in either the second or third rolls, they were far more likely to lie and say the first roll produced a six when it didn't. It's as if getting a six in one of the later, irrelevant rolls somehow made it easier to justify lying about getting that number in the first roll. Overall, 73 per cent of the participants' hypothetical responses were honest, 16 per cent were "justified" lies of this kind, and 9 per cent were out-and-out lies (it's intriguing that so many participants were willing to be honest about the fact that they would have lied, but that's a whole other story).

Lewis and his colleagues also used the data from the second part of the study to compare rates of (self-confessed) hypothetical lying between psychology graduates and economics grads. Economists were much more likely to lie (for example, their rate of outright lying was 13 per cent vs. 6 per cent for psychologists). This was only partly explained by there being more male economists than male psychologists, with men being the more dishonest sex across both disciplines. Of course, another way to look at these data is that the economists were more honest about the fact that they would lie, but again that's another story and an issue not addressed here by the researchers.

"At the level of individual differences it has been demonstrated that economists are more willing to cheat," the researchers said. "This is of some concern given that people with economics degrees hold prominent positions in financial institutions."